Q4 2024 Getty Realty Corp Earnings Call
Good morning and welcome to Getty Realty fourth quarter 2024 earnings call. This call is being recorded. After the presentation, there will be an opportunity to ask questions.
Speaker Change: Prior to starting the call, Joshua Dicker, Executive Vice President, General Counsel and Secretary of the Company, will read a safe hour statement and provide information about non-GAAP financial measures.
Please go ahead Mr. Dicker.
Speaker Change: Thank you, operator. I would like to thank you all for joining us for Getty Realty's fourth quarter and year-end earnings conference call.
Speaker Change: Yesterday afternoon, the company released its financial and operating results for the quarter at year-end of December 31, 2024. The Form 8K and earnings release are available in the Investor Relations section of our website at GettyRealty.com.
Speaker Change: Certain statements made during this call are not based on historical information and may constitute forward-looking statements.
Speaker Change: These statements reflect management's current expectations and beliefs, and are subject to trends, events, and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.
Speaker Change: Examples of forward-looking statements include our 2025 guidance and may include statements made by management including those regarding the company's future operations, future financial performance, or investment plans and opportunities.
Speaker Change: We caution you that such statements reflect our best judgment based on factors currently known to us, and that actual events or results could differ materially.
Speaker Change: I refer you to the company's annual report on Form 10-K for the year ended December 31.
Speaker Change: 2023, as well as any subsequent filings with the SEC for a more detailed discussion of the risks and other factors that could cause actual results to differ materially from those expressed or implied in any forward- looking statements made today.
Speaker Change: You should not place undue reliance on forward-looking statements which reflect our view only as of today. The company undertakes no duty to update any forward-looking statements that may be made during this call.
Speaker Change: Also, please refer to our earnings release for a discussion of our use of non-GAAP financial measures, including our definition of Adjusted Funds from Operations, or AFFO, and our reconciliation of those measures to net earnings.
Speaker Change: With that, let me turn the call over to Christopher Constant, our Chief Executive Officer.
Christopher Constant: Thank you, Josh. Good morning, everyone, and welcome to our earnings call for the fourth quarter and year-end 2024.
Speaker Change: Joining us on the call today are Mark Olear, our Chief Operating Officer, and Brian Dickman, our Chief Financial Officer.
Speaker Change: I will lead off today's call by summarizing our financial results and investment activities and will provide commentary on how we are effectively executing our growth and diversification strategies.
and the convenience and automotive retail sectors.
Speaker Change: Mark will then take you through the details of investments and the status of our portfolio and Brian will further discuss our financial results and guidance.
Speaker Change: In 2024, our consistent and disciplined approach produced another successful year of earnings and portfolio growth, as we again embraced the challenge of scaling our company.
Speaker Change: I'm especially proud of our performance during a year that I would characterize as challenging with respect to both the transaction market for our property types and the capital markets.
Speaker Change: We invested $209 million in high-quality convenience and automotive retail assets, raised $289 million of attractively priced capital, and continue to advance our portfolio diversification objectives.
Speaker Change: We expanded our presence in top MSAs around the U.S. and deployed capital across all of our target sectors while continuing to prioritize our direct sale-leaseback business model.
Speaker Change: Our successful investment activities combined with the stable rents from our in-place portfolio produced strong revenue and earnings growth and a sector-leading dividend increase.
Speaker Change: Our performance continues to be driven by our fantastic team at Yeti.
Speaker Change: For the year, Getty grew its annualized base rent by 14.5% to approximately $198 million and reported AFFO per share of $2.34.
Speaker Change: which exceeded the high end of our guidance range and represented a 4% increase over the prior year's result.
Speaker Change: Our financial performance was driven by the strength of our investment activity as we acquired 71 properties and provided development funding for the construction of additional new-to-industry assets.
Speaker Change: We added eight new tenants to the portfolio in 2024 and completed additional transactions with nine existing relationships
Speaker Change: Equally important, we were able to drive accretive investment spreads on our investments in 2024 through effective execution in the debt and equity capital markets.
Speaker Change: Getty was both timely and strategic in locking in 125 million of long-term notes in September 2024 in advance of significant upward moves in treasury yields, addressing our only near-term notes maturity, and provided capital to fund future investments.
Speaker Change: We also raised $32 million under our ATM program in the fourth quarter.
Speaker Change: When you combine these transactions with our third quarter follow-on equity offering, Getty is very well capitalized and enters 2025 with significant dry powder for acquisitions.
Speaker Change: Our capital position supports our investment pipeline, including more than 35 million of assets under contract, plus a growing number of opportunities that are in various stages in the acquisitions process.
Speaker Change: In fact, last night, after Ruby released earnings, we signed a contract for a more than $50 million portfolio transaction in the automotive service sector.
Speaker Change: We remain confident that our relationship-based facilities-backed strategy will generate continued opportunities for Getty to acquire assets in our target convenience and automotive retail sectors as we move through 2025.
Speaker Change: In general, I believe Getty is stronger and better positioned than it's ever been.
Speaker Change: A main reason for this is the diversification strategy we embarked upon approximately five years ago.
Speaker Change: By broadening our investment focus to include several sectors within the convenience and automotive retail landscape.
Speaker Change: We have grown our total ABR by approximately 70% since the end of 2019.
Speaker Change: while increasing rental income from non-conveniencing gas properties to 28% of total AVR from less than 3% before we began executing on the strategy.
Speaker Change: We've also added 35 tenants to our roster during this time frame and expanded into several new geographic markets.
Speaker Change: I would emphasize that our decision to diversify was not a pivot away from the convenience store sector.
Speaker Change: which we are still committed to and where we continue to source compelling investment opportunities.
Speaker Change: Rather, our diversification efforts are driven by our desire to scale our business by acquiring retail real estate with similar property attributes which are occupied by tenants operating in sectors that share similar growth dynamics and operating fundamentals.
Speaker Change: The convenience and automotive retail sector is supported by accelerating consumer trends for speed and service, reinforced by the increased count and advanced age and complexity of vehicles on the road, and populated with growth companies that are consolidating fragmented businesses.
Speaker Change: Tenants operating in the sector generally provide essential goods and services, are largely internet and recession resistant, and have demonstrated consistent performance over the past several years.
Speaker Change: And the underlying real estate we acquire is typically located in high-density metro areas with excellent access and visibility.
Speaker Change: We remain positive on the sectors, committed to continuing to execute on our growth and diversification plans, and focused on creating value for our shareholders.
Mark Olear: With that, I will let Mark discuss our portfolio and investment activities.
Mark Olear: Thank you, Chris. At URAN, our lease portfolio included 1,114 net lease properties and one active redevelopment site.
Speaker Change: Excluding the active redevelopment, occupancy was 99.7% and our weighted average lease term was 10.2 years.
Speaker Change: Our portfolio spans 42 states plus Washington DC, with 60% of our annualized base rent coming from the top 50 MSAs and 76% coming from the top 100 MSAs.
Speaker Change: Our rents continue to be well covered with a trailing 12 month tenant rent coverage ratio of 2.6 times
Speaker Change: Turning to our investment activities for the year, we've underwrote $5.5 billion of potential investments.
Speaker Change: Continuing with the theme of portfolio diversification, 57% of our underwriting is focused on non-convenience and gas property types.
Speaker Change: including express tunnel car washes, auto service centers, primarily collision centers, oil change, and tire locations, and drive-thru quick service restaurants.
Convenience stores represent the remaining 43% of our underwriting activity.
Speaker Change: We had a strong fourth quarter in which we invested $76.4 million across 21 properties at an initial cash yield of 8.9%. The weighted average lease term on acquired assets for the quarter was 15.6 years.
Speaker Change: Highlights of this quarter's investments include the acquisition of 14 convenience stores located in the Houston and Las Vegas MSAs for $69 million.
Speaker Change: Two express tunnel car wash properties located in South Carolina and Vermont for $10.2 million, of which $9.3 million was previously funded.
Speaker Change: Two auto service properties located in North Carolina, Virginia for $3.7 million, of which $1.7 million was previously funded. And one drive-thru quick-serve restaurant located in Baton Rouge, Louisiana for $2.6 million.
Speaker Change: We also advanced incremental development funding in the amount of $1.8 million for the construction of two new-to-industry express tunnel car washes.
Speaker Change: These assets are either already owned by the company and are under construction or will be acquired via sale-leaseback transactions at the end of the project's respective construction periods.
Speaker Change: For the year, Getty invested $209 million across 78 properties at an initial cash yield of 8.3%.
Speaker Change: This year's investment activity can continue to prioritize diversification across our target industry verticals.
Convenience stores represented 41% of transaction volume.
Express Tonneau Car Wash is for 33%.
Speaker Change: Auto service centers were 21% and drive-through QSRs were 5%, making 2024 the most balanced investment year since the company expanded its convenience automotive retail strategy.
Oh.
Speaker Change: After the quarter end, we invested an additional $4 million to acquire a newly constructed express tunnel car wash in New York.
Thank you.
Speaker Change: As Chris mentioned, we currently have more than $35 million of commitments to fund acquisitions and developments, or more than $85 million, including the contract we signed last night.
Speaker Change: which we expect to be best over the next 9-12 months at an average initial yield in the high 7% area.
Speaker Change: Overall, 2024 was a challenging year for the net lease transaction market and our core property types. Broader economic concerns drove slowdown in financing opportunities tied to industry M&A, and operators generally slowed the pace of their new store development pipelines.
Speaker Change: In addition, we did not see a meaningful contraction in the bid-ask spread between buyers and sellers for transaction pricing.
Speaker Change: To start 2025, there has been a modest increase in transaction activity, but I will caution that while our tenants are generally optimistic about growth, the gap in pricing continues to be a material impediment for sale-e-spec transactions.
Speaker Change: We believe interest rates will be higher for longer and sellers need more time to adjust their expectations.
Speaker Change: That said, we do expect to see modest cap rate compression from the 8.3% yields we achieved in 2024, which was driven by a couple of larger portfolio transactions with cap rates pushing 9%.
Speaker Change: Regardless of market headwinds, our job remains to source attractive investment opportunities that fit our portfolio and which can be financed accretably.
Speaker Change: We have invested over $1 billion in the last five years, which we believe demonstrates that Getty can source opportunity in our target sectors across a range of interest rate and macroeconomic environments.
Speaker Change: As we leverage our relationship-based strategy and prioritize direct business with new and repeat tenants, we remain confident that we will be able to accredibly deploy capital again in 2025.
Speaker Change: Moving to our redevelopment platform, for the year we invested $1.5 million across numerous projects in various stages of construction, development, and permitting.
Speaker Change: We completed a new Chipotle restaurant in Providence, Rhode Island, MSA. At year-end, we had four signed leases for projects, all of which are for new-to-industry oil change locations.
Speaker Change: Subsequent to year-end, we funded $500,000 toward a tenant's modernization of one of our legacy gas and repair properties for which we'll receive incremental rent and extended base term of the five property unitary lease.
Speaker Change: We have additional projects in various stages in our pipeline and expect to continuously complete projects over the next few years.
Speaker Change: Continuing with our asset management efforts, the significant increase in our weighted average lease term during the year was due to the extension of four unitary leases representing approximately $25 million of ABR.
Speaker Change: It's noteworthy that these renewals reduced our 2026 and 2027 lease maturities to approximately 8% of total ABR at year-end as compared to 21.5% of total ABR as of December 31st, 2023.
Speaker Change: For the year ended 2024, we disposed of 31 properties for gross proceeds of approximately $13 million, including 7 properties for gross proceeds of $7.5 million in the fourth quarter.
With that, I'll turn the call over to Brian.
Speaker Change: Thank you, Mark. Morning, everyone. Last night, we reported AFFO per share of $0.60 for Q4 2024, representing an increase of 5.3% over the $0.57 we reported for Q4 2023.
Speaker Change: FFO and net income for the quarter were $0.57 and $0.39 per share respectively.
Speaker Change: For the full year 2024, AFFO per share was $2.34, representing an increase of 4% over the $2.25 we reported for 2023.
Speaker Change: FFO and net income for 2024 were $2.21 and $1.25 per share, respectively.
Speaker Change: A more detailed description of our quarterly and full-year results can be found in last night's earnings release and our corporate presentation contains additional information regarding our earnings and dividend per share growth over the last several years.
Thank you very much.
Speaker Change: Annualized base rent, or ABR, as of December 31st, 2024, was $197.8 million, an increase of 14.5% over the $172.8 million we reported as of December 31st, 2023.
Speaker Change: For the full year 2024, total G&A as a percentage of total revenue was 12.4%, a 40 basis points improvement over 2023.
Speaker Change: And G&A excluding stock-based compensation and non-recurring retirement and severance costs as a percentage of cash rental income and interest income was 9.6% in 2024, a 60 basis points improvement over 2023.
Speaker Change: Management focuses on the second metric given that it adjusts for certain non-cash and non-recurring items over which we have less control in both the numerator and denominator.
Speaker Change: We continue to anticipate the G&A dollar increases will moderate and G&A ratios will further improve as we continue to scale the company.
Speaker Change: Moving to an update on the balance sheet and liquidity, as of December 31, 2024, net debt to EBITDA was 5.2 times or 4.2 times taking into account unsettled forward equity.
Speaker Change: We continue to target leverage of 4.5 times to 5.5 times net debt to EBITDA and are well positioned to maintain those levels going forward.
Speaker Change: Fixed charge coverage was a healthy 3.8 times as of December 31st.
Speaker Change: During the fourth quarter, as previously announced, we close on $125 million of new unsecured notes. The notes will fund later in February, and proceeds will be used to repay $50 million of notes that mature this month, which is our only near-term notes maturity, as well as to fund investment activity.
Speaker Change: A few weeks ago, we refinanced our revolving credit facility, which was set to mature in October of this year.
Speaker Change: As part of that transaction, we upsized the facility from $300 million to $450 million and extended the term to January 2029 or January 2030, including extension options.
Speaker Change: We use the increased capacity to repay our $150 million term loan, which was also due in October 2025, allowing us to address that maturity in the near term while giving ourselves additional flexibility with respect to the ultimate refinancing of those borrowings.
Speaker Change: I'd also like to highlight that in addition to continued support of our existing lenders, we're able to bring four new lenders into our bank group as we continue to cultivate and expand our capital relationships.
Speaker Change: Pro forma for these debt transactions, the company's weighted average debt maturity was 5.6 years. The weighted average cost of our debt was 4.4%, and we have no debt maturities until June, 2028.
Speaker Change: We're also active on our ATM program during the fourth quarter through a combination of regular issuance and reverse inquiries. For the quarter we sold 993,000 shares all on a forward basis which will generate gross proceeds of 32.3 million dollars.
Speaker Change: At year end, we had a total of approximately 5.4 million shares of common stock subject to outstanding forward agreements, which upon settlement are anticipated to raise gross proceeds of approximately $164.8 million.
Speaker Change: We ended the year in a very strong capital position with the new unsecured notes proceeds and unsettled forward equity we just discussed, along with $17 million of cash and 1031 proceeds and more than $280 million of capacity on our unsecured revolving credit facility.
Speaker Change: We have more than sufficient capital to fund the now $85 million of investments we have under contract, as well as additional investment activity as we move through 2025.
Thank you.
Speaker Change: Before I close with commentary on our 2025 AFICO per share guidance, I'd like to provide some color on the recent ZIPS car wash bankruptcy that was filed last week.
Speaker Change: Zips is the fifth largest express tunnel car wash operator in the country, with a total of nearly 300 facilities.
Speaker Change: Getty has 12 sites leased to ZIPS, representing approximately $3.6 million of ABR, or 1.8% of our total ABR at year-end.
Speaker Change: ZIPS was current on their rental obligations through January of this year.
Speaker Change: As part of their plan for reorganization, ZIPS has filed a motion to reject a number of leases, including 7 of our 12 properties.
Speaker Change: This motion has yet to be heard, and the outcome for our locations remains open to discussions.
Speaker Change: We have re-underwritten the sites and had initial conversations with several other car wash operators regarding potential tenancy.
Speaker Change: At this point, we're operating under the assumption that these seven sites will be returned to us and released to new operators. Although, as I said, the outcome of our sites does remain open to discussions with ZIPS.
Speaker Change: Whether these sites are released to different operators or remain leased to ZIPS, rent adjustments are possible as we work through the process.
Speaker Change: After considering potential downtime to release the seven zip sites as well as potential rent adjustments, we are revising our AFFO guidance to a range of $2.38 to $2.41 per share from our initial guidance of $2.40 to $2.42 per share.
Speaker Change: Our initial guidance included a 15 basis points loss factor for uncollectible rents, or approximately $300, and that continues to be incorporated in our revised guidance, in addition to our adjustments for ZIPS.
Speaker Change: This loss factor is not tied to any specific tenant or situation, but is an assumption that we think is prudent to include at the beginning of any year.
Speaker Change: Our guidance also includes completed transaction activity as of the date of our earnings release, as well as the issuance and simultaneous repayment of the unsecured notes we discussed earlier, but does not include assumptions for any prospective acquisitions, dispositions, or capital markets activities, including the settlement of outstanding court agreements.
Speaker Change: Primary factors impacting our 2025 guidance include variability with respect to uncollectible rent, certain operating expenses, deal pursuit costs, and the timing of anticipated demolition costs for redevelopment projects that run through property costs on our P&L.
Speaker Change: With that, I'll ask the operator to open the call for questions.
and Michael C.
Should we begin the question and answer session?
Speaker Change: Yes, please. Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and two if you would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: Ladies and gentlemen, we will wait for a moment while we poll for questions.
Speaker Change: The first question comes from Mitch Germain with Citizens GMP. Please go ahead.
Good morning. Thanks for taking my question.
Speaker Change: I'm just trying to understand the ZIPS situation a little bit more.
Speaker Change: Are those sites, you know, ones that have been recently developed? I'm just trying to understand, you know, the the re-tenanting efforts and if it requires any capital on your part.
Speaker Change: So yeah, this is Chris. So we acquired those sites in 2019. I think 10 of the 12 were brand-new to industry locations.
Speaker Change: One of the benefits, I think, of our diversification strategy and our other Car Wash partners in the portfolio is we've already had discussions, as Brian mentioned, about potentially
Speaker Change: releasing some of these sites. You know, it's a little too early to tell whether or not they require capital or if they do, how much capital, but we've used a range of estimates in our revised guidance figure there, which we think is appropriate at this time. And, you know, I think given the
Speaker Change: The state of those properties and how new they are to the industry, we do expect them to be released and to be operating express tunnel car washes once this is past us.
Speaker Change: Great, thanks for that. And then, you know, obviously you've got other operators, you know, Zips is obviously looking to reduce their debt load, probably took on an ambitious growth plan.
Speaker Change: Are you having discussions with your existing operators to gain a sense of their balance sheets, their financial situations? Is there any sort of concern on your part or do you think that this is just a one-off situation here?
Speaker Change: Yeah, I mean, I think, let me start with just kind of our general business strategy, right? Given that we are focused investors in these convenience and automotive sectors, you know, we kind of pride ourselves on having a lot of conversations with management teams, including Zips's team, on a fairly frequent basis.
Speaker Change: As it relates to the car wash sector, one of the things that we've prioritized is
Speaker Change: large operators, a lot of experience in terms of managing these businesses and growth, having to keep every reliance on the subscription model. So I think, you know, we've had a lot of conversations, you know, including with Zips.
Speaker Change: I don't want to speak to their conversations that Zip's had away from Getty, but I think we're comfortable with our current car wash roster. I think we're comfortable with the express tunnel sector, and we'll continue to operate like we always do in terms of...
Speaker Change: speaking to tenants, really diving into their performance on a site level, on a corporate basis, and continuing dialogue and adding selectively with tenants that we like in the sector.
Speaker Change: Great, that's super helpful. I think last one for me, you know, you're going into
Speaker Change: 2025 with a pretty significant amount of liquidity I mean just
Speaker Change: Irrespective of the credit facility capacity, it's 300, you've got the term loan of 75, you've got the unsettled equity.
Speaker Change: the capital related to the debt first and then start to factor in the equity. Maybe just talk about the cadence of how, you know, you're looking at funding the acquisitions going forward.
Speaker Change: Yeah, happy to Mitch, you know, like in general we're always trying to be thoughtful
Speaker Change: right, about how we're raising capital, right, and pair that with the thoughtfulness, you know, Chris just went through about how we're deploying capital. We like to keep the pipeline, you know, relatively pre-funded. We like giving our acquisition team visibility into our cost of capital. That obviously helps them in the deployment of the capital.
Speaker Change: So, I think we've been fairly effective with that over the last several years, and you should continue to expect similar execution there.
Speaker Change: As far as the cadence, yeah, I think you hit it. You know, we had...
We have the $75 million of notes.
Speaker Change: net that'll come available to us those proceeds here at the end of the month.
Speaker Change: So, yeah, generally speaking, and all else being constant, I think you can assume we use those debt proceeds to pay down the revolver, and then we have that equity to continue to take down and deploy throughout the year, as well as significant revolver capacity to pair with that.
Great, thank you for that. Congrats on the air.
Speaker Change: Thank you. The next question comes from Lionel Farrell-Granat with Bank of America. Please go ahead.
Lionel Farrell-Granat: Hi, good morning. Thank you for taking my question. I just wanted to also go back to the ZIPS. And in terms of the baguette, I know you were...
Lionel Farrell-Granat: in the 15 basis points of loss factor on addition to the changes made to guidance. And so, the assumptions that are within that, are you assuming that the seven...
Lionel Farrell-Granat: properties that were rejected are, is worst case scenario, no rent for the rest of the year. I'm just wondering the moving pieces of that guidance.
Lionel Farrell-Granat: Yeah, happy to hit that Farrell. So there's obviously a range of outcomes, and we don't want to get too specific. These are live discussions, you know, obviously.
Lionel Farrell-Granat: I think Chris hit it, our main point is we feel that the revised guidance appropriately captures.
Lionel Farrell-Granat: those range of outcomes and is the best way to quantify the potential impact.
Lionel Farrell-Granat: For you all, what I would say though is within that range of outcomes
Lionel Farrell-Granat: We do expect that these sites get released this year, and that we recapture a significant majority of the rent, but again, there's a range within that, including the fact that, as I mentioned in my prepared remarks, there are still discussions with ZIPS.
Lionel Farrell-Granat: But our guidance assumes that they're released, there's a range of downtime, and there's a range of rent recaptures, and that's reflected in the AFFO per share numbers.
Speaker Change: Okay, thank you. And we can also get a little bit more color on the portfolio transaction that you mentioned that has already occurred, quarter to date.
Lionel Farrell-Granat: How did that come about and is that something that you're looking to do more of in the focus of larger portfolio transactions versus the one-off sale lease back or development funding?
Lionel Farrell-Granat: On this basis, so we would certainly like to get this transaction closed with a tenant.
Lionel Farrell-Granat: And then obviously look at do we do repeat business with that more can we do more in these various sectors within within the automotive sector, but again I just come back to the broader convenience at automotive strategy.
Lionel Farrell-Granat: A lot of assets and opportunities to underwrite.
Lionel Farrell-Granat: Portfolio sale leaseback transactions are the bread and butter of our growth strategy. So the more that we can do here the more that's direct more business development, we can do and we're successful in getting a little bit.
Lionel Farrell-Granat: Okay.
Lionel Farrell-Granat: Great. Thank you so much.
Lionel Farrell-Granat: Thank you then.
Speaker Change: The next question comes from Wes Golladay with Baird. Please go ahead.
Wes Golladay: Yeah, good morning, everyone.
Wes Golladay: With that pipeline is it straight sale leasebacks or would there be any development opportunity with that new tenant.
Wes Golladay: Yeah.
Wes Golladay: 85 toll is is a combination west of of sale leasebacks and development funding.
Speaker Change: Interesting is if you go back over the last two years.
Speaker Change: 2023, it was a heavy development funding here and a lot of those deals kind of close out earlier this year or even with late in 'twenty three 'twenty.
Speaker Change: 24 was the opposite it was almost all sale leaseback transactions for getting and I think in Mark's commentary you mentioned, we're seeing.
Speaker Change: Interest in M&A renewed interest and operators looking to grow their new store pipelines. So I think as we roll through 2025, Youre definitely going to see more of a mix. This year between the sale leaseback business under development foreign product.
Speaker Change: It was just Brian I would just add we typically try to provide some sense of timing you know for you all around when the pipeline the capital funding the pipeline will be deployed.
Speaker Change: When you're seeing ranges that are you know say three to six months you can anticipate that that's going to be more sale leaseback more acquisition of existing properties. When you see range is more in the nine to 12 months, which is what we put out and that doesn't change with this contract that was just side you can assume that that's going to be more development funding.
Speaker Change: And so of the 85 plus million that's now under contract in this case and given the commentary that Chris just went through and Mark earlier. The bulk of that is development funding probably 80% of that is development funding and again you can see that in the duration over which we will deploy the capital.
Speaker Change: Okay. Okay that makes sense and then maybe just go one more for you on zips pick and just know some high level math cap rate assumptions. It looks like you have a basis around $4 million, so pretty pretty good basis, there and so when you look at your recovery that you're kind of baking in there I mean, what are you thinking from a you know.
Speaker Change: Maybe timing of releasing and are you pretty confident it will all go to another car wash concept.
Speaker Change: Yeah, so and but not looking to be a you know evasive here don't want to get too specific on the downtime assumptions or the the rest again, we've got a lot of discussions going on with the current operator, and others and just don't want to set any expectations out there. So you know.
Speaker Change: As I said on that front.
Speaker Change: We expect them to be released this year, we're assuming they'll be released this year and that we will recapture a significant majority of the rent whether.
Speaker Change: Whether they stay with zips, whether they go to one operator, whether they go to multiple operators those are all possible outcomes. It doesn't have to be anybody else.
Speaker Change: But pretty confident it's going to go to a car wash it based on your early discussions at this time.
Speaker Change: Yeah, you know as Chris said these are you know.
Speaker Change: The 12, including the bulk of which we think will get returned to us or we're assuming we'll get returned to us or new construction right roughly five years old and given our relationships and the dialogue we've had today characterize them as constructive and we're going to go through the process and that's what we're assuming.
Speaker Change: Okay. Thanks, everyone.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, a reminder to all the participants that you May press star and one to ask a question.
Speaker Change: The next question comes from the line of <unk> Rama.
Brahma: Brahma with Keybanc capital markets. Please go ahead.
Speaker Change: Okay.
Speaker Change: Great. Thank you just a couple of ones that you know if you were to find a similar operator, you know how quickly would you be able to turn the space around once you get the.
Speaker Change:
Speaker Change: The lease back to you.
Speaker Change: Hi, This is mark so the units where they were in all the operating units as Chris said, they're relatively new.
Speaker Change: Most of them are somewhere in the five year old range. The equipment, we'll do survey as well as Brian said, it's a fluid up it's a fluid situation, but they are ready to go.
Speaker Change: Continue to operate their current state or just.
Speaker Change: Transfer over to the operator and get back in operations pretty quickly.
Speaker Change: Okay, great. Thank you and then on the other five locations that you have with Sips do you feel like maybe those could be at risk to or is it just the seven mm.
Speaker Change: So you say well, it's it's Brian I think where we're operating under the assumption.
Speaker Change: Utilizing those facts that are in the public domain. So we're assuming that those five will remain with list with just the seven we will get back to.
Speaker Change: The portfolio as of 12 was profitable yeah. When we look at tenant rent coverage or there was a a range of individual property coverages within that.
Speaker Change: And you can draw conclusions in terms of which ones were rejected and which ones weren't so yeah. I think it's safe to assume that those are stronger operating stores.
Speaker Change: With sufficient headroom around coverage and profitability.
Speaker Change: So where we're assuming the five stay in the seven get released but.
Speaker Change: Having been through some of these situations as many of us in the room have not necessarily hear getty, but elsewhere.
Speaker Change: Yeah.
Speaker Change: He is a range of outcomes and they're subject to discussions you know as I think you know this is this about a week or so where we're utilizing the facts that are available to us to make our assumptions and shared the impact of that with you guys.
Speaker Change: And we expect to have additional information here in the near term as we all move forward.
Speaker Change: Okay, Great and then you know in your prepared remarks, you guys talked about some moderation on the cap rates from the eight 3% the expression in 24, given the large transactions are weighted in there but.
Speaker Change: But given where the 10 year or is that today you know how how much moderation do you think could occur or maybe it's less so than maybe you.
Speaker Change: And then you're left yet.
Speaker Change: I I I would just point you to so last year was the three that we talked about you have to look at the pipeline. The 85 that we're now up to right I think that's in the upper seven range. So if you want to use that is what the strip for a modest amount of compression.
Speaker Change: We tend to agree with you right given where the tenure is that theres not theres not too much appetite you are getting to see cap rates compress much more meaningfully beyond that.
Speaker Change: And again, we're we're being a direct sale leaseback player regimens are it's our job to go out and underwrite and find opportunities that fit for our portfolio and there'll be to price it and finance accretively.
Speaker Change: Yeah.
Speaker Change: Okay, great. Thank you.
Speaker Change: Thank you.
Speaker Change: A follow up question from the line of Mitch Germain with JMP. Please go ahead.
Speaker Change: Thanks.
Speaker Change: I just wanted to circle back to gypsum overtime.
Speaker Change: I'm just trying to understand that and you might have talked about and I do apologize. If you did what are the actual assumptions that you used to shoot me a couple of months of downtime and then obviously you've got a little bit of an expense pick up since you are not be able to recover them is that how it's being factored into the model Brian.
Brian Dickman: Yeah, and so and again I'll emphasize Mitch we're really not you know we don't want to be evasive here, but we have live discussion. So we just don't want to put any expectations out into the public domain about what specifically, we expect to recover and how long we expect to be down, but but you can imagine in these situations again, there's a range right.
Brian Dickman: We could release them earlier and take larger rent costs right, we could have longer periods of downtime in an effort to recapture more rent.
Brian Dickman: Again, as we noted they could theoretically stay with hips.
Brian Dickman: So again, we captured that range and our <unk> per share guidance, but mechanically yes, youre thinking about it the right way during downtime, we obviously wouldn't receive any rent we would have to cover a carry cost primarily real estate taxes and any other maintenance too.
Brian Dickman: To keep the property safe and secure and warm.
Brian Dickman: And and then again any any rent adjustments.
Brian Dickman: What would become a parent upon re leasing and those carrying costs would obviously get picked up.
Brian Dickman: By our attendance at that time.
Brian Dickman: Alright. Thank you I appreciate you guys.
Brian Dickman: Thank you.
Speaker Change: Ladies and gentlemen, there are no further questions I would now like to hand, the conference over to Christopher constant for closing comments.
Christopher Constant: Thank you operator, and thank you everyone for joining us this morning for our call.
Speaker Change: Look forward to continuing to grow and yeah, you can look for getting back on with everybody more or our first quarter of 2025 results at the end of April.
Speaker Change: Thank you the conference of Getty Realty has now concluded.
Speaker Change: You for your participation you may now disconnect your lines.
Speaker Change: [music].